Annual Report - Ranbaxy - 2009-2010

RANBAXY LABORATORIES LIMITED

ANNUAL REPORT 2009

DIRECTOR'S REPORT

Your Directors have pleasure in presenting the 49th Annual Report and
Audited Accounts for the year ended December 31, 2009.



STANDALONE WORKING RESULTS (UNDER INDIAN GAAP)

Rs. in Million
Year ended Year ended
December 31, December 31,
2009 2008

Net Sales 45,359.09 43,393.63

Profit/(Loss) before Interest,
Exchange (Gain)/ Loss (Net) 11,002.73 (5,713.32)
on Loans, Depreciation, Amortization,
Impairment and Tax

Interest 394.66 1,458.28

Exchange (Gain)/ Loss on Loans (1,493.13) 7,474.52

Depreciation, Amortization and Impairment 1,482.03 1,544.69

Profit/(Loss) before Tax 10,619.17 (16,190.81)

Tax charge/ (Benefit) 4,899.33 (5,742.79)

Profit/(Loss) after Tax 5,719.84 (10,448.02)

Balance as per last Balance Sheet (8,265.83) 2,162.69

Transfer from Foreign Projects Reserve 13.76 19.50

Surplus/(Deficit) carried forward (2,532.23) (8,265.83)

CONSOLIDATED WORKING RESULTS
(UNDER INDIAN GAAP)

Net Sales 73,441.32 72,555.23

Profit/(Loss) before Interest, Exchange
(Gain)/ Loss (Net) on Loans, Depreciation, 11,991.04 (2,626.26)
Amortization, Impairment and Tax

Interest 710.43 2,055.01

Exchange (Gain)/ Loss on Loans (1,493.13) 7,494.35

Depreciation, Amortization and Impairment 2,676.12 2,824.69

Profit/(Loss) before Tax 10,097.62 (15,000.31)

Tax charge / (Benefit) 6,990.87 (5,650.84)

Profit/(Loss) after Tax 3,106.75 (9,349.47)

Share in (Loss)/Profit of Associates(Net) (32.38) (78.21)

Minority Interest (109.45) (84.37)

Profit/(Loss) for the year 2,964.92 (9,512.05)

Balance as per last Balance Sheet (4,009.92) 5,482.63

Transfer from Foreign Projects Reserve 13.76 19.50

Surplus /(Deficit) carried forward (1,031.24) (4,009.92)

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Financial Statements for the year ended December 31, 2009,
under Indian GAAP form part of the Annual Report.

OPERATIONS:

The Company recorded net consolidated sales of Rs. 73,441 Mn against
Rs.72,555 Mn in the previous year. Profit before Tax stood at Rs.10,098 Mn
against a loss of Rs. 15,000 Mn for the previous year. Profit after Tax for
the year stood at Rs. 3,107 Mn against a loss of Rs. 9,349 Mn for the
previous year. The turnaround in profits from operations was primarily on
account of revenues from First to File products in the US market, cost
optimization and higher gross margin due to changes in product mix. The
strengthening of rupee versus dollar also contributed towards increased
earnings. The Company continues to focus on cost optimization and efficient
working capital management. The Company has started pursuing Hybrid
Business Model with Daiichi Sankyo Company, Limited (DS), its Holding
Company, to leverage the strengths of both the organizations. During the
year the Company launched a DS branded product in India and another
Innovator product in Romania. The Company intends to launch such products
in Africa as well in other countries. In addition, the Company and DS are
working on various initiatives to leverage cost synergies arising from
back-end functions such as IT and manufacturing.

In regard to Application Integrity Policy, warning letters to its
manufacturing facilities at Poanta Sahib (India) and Gloversville (USA) and
import alert issued by USFDA, the Company is continuously making sincere
efforts for early resolution of the issues raised by the USFDA and the
Department of Justice and is fully co-operating with the said authorities.

DIVIDEND:

In view of the carry forward losses, no dividend has been declared for the
year.

CHANGES IN CAPITAL STRUCTURE:

Allotment of shares on exercise of Employees' Stock Options:

During the year, the Company allotted Equity Shares (on pari-passu basis)
pursuant to exercise of Stock Options by the eligible employees, as
summarized below:

Date of Allotment No. of Shares

July 13, 2009 2,160
October 12, 2009 45,445

SUBSIDIARIES AND JOINT VENTURES:

Japan:

Japan, as the second largest Pharmaceutical market in the world, offers
significant opportunity in the generic arena due to low generic penetration
and the Ministry of Health, Labor and Welfare's target of 30%
genericization in Japan by 2012. With a view to have a larger participation
in growth in the generic filing opportunities in Japan, the Company set up
a wholly-owned subsidiary in Japan under the name of Ranbaxy Japan K. K.
and divested its stake in Nihon Pharmaceutical Industry Co. Limited, a
joint venture in Japan with Nippon Chemiphar Co., Limited.

China and Vietnam:

As a part of consolidating its operations, the Company has divested its
stake in its subsidiaries in Vietnam and China, having manufacturing
operations. However, the Company continues to have marketing presence in
Vietnam and China as these are important pharmaceutical markets.

A statement pursuant to Section 212 of the Companies Act, 1956 ('Act'),
relating to subsidiary companies is attached to the accounts. In terms of
the approval granted by the Central Government vide letter no. 47/708/2009-
CL-III dated December 8, 2009, under Section 212(8) of the Act, the audited
accounts and Reports of Board of Directors and Auditors of the Company's
subsidiaries have not been annexed to this Annual Report. The consolidated
financial statements prepared in accordance with Accounting Standard - 21
issued by the Institute of Chartered Accountants of India presented in this
Annual Report include the financial information of the subsidiary
companies.

ACQUISITIONS:

The Company has acquired:

(a) Marketing rights for dermatological and lifestyle products from Ochoa
Laboratories Limited, to complement the Company's existing derma portfolio;
and

(b) Business and manufacturing facility in Bangalore from Biovel Life
Sciences Private Limited. This will provide a platform to the Company to
manufacture vaccines as well as bio-therapeutics.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Management Discussion and Analysis Report, as required under the Listing
Agreements with the Stock Exchanges, is enclosed at Annexure 'A'.

EMPLOYEES' STOCK OPTION SCHEME:

Information regarding the Employees' Stock Option Scheme is enclosed at
Annexure 'B'.

LISTING AT STOCK EXCHANGES:

The Equity Shares of the Company continue to be listed on Bombay Stock
Exchange Ltd. and The National Stock Exchange of India Ltd. Global
Depository Shares are listed on the Stock Exchange at Luxembourg and
Foreign Currency Convertible Bonds are listed on the Singapore Exchange
Securities Trading Ltd. The annual listing fees for the year 2009-2010 have
been paid to these Exchanges.

DISCLOSURE OF PARTICULARS:

As required by the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988, the relevant information and data is given
at Annexure 'C'.

FIXED DEPOSITS:

The Company has not invited / received any fixed deposits during the year.

DIRECTORS' RESPONSIBILITY STATEMENT:

In terms of provisions of Section 217(2AA) of the Companies Act, 1956,
('Act'), your Directors confirm that:

(i) In the preparation of the annual accounts, the applicable accounting
standards have been followed, along with proper explanation relating to
material departures, wherever applicable.

(ii) The Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company, as at the end of the accounting year and of the profit of the
Company for the year.

(iii) The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern
basis.

DIRECTORS:

On May 24, 2009, Mr. Malvinder Mohan Singh stepped down as Chairman, CEO &
Managing Director, Dr. Tsutomu Une was elected as the non - executive
Chairman of the Board of Directors and Mr. Atul Sobti was appointed as the
CEO & Managing Director of the Company. The shareholders of the Company
vide their resolution dated September 22, 2009, passed through postal
ballot, approved the appointment of Mr. Sobti as CEO & Managing Director of
the Company for a period of 3 years. Mr. Sunil Godhwani and Mr. Balinder
Singh Dhillon resigned from the Directorship of the Company effective May
24, 2009. The Directors place on record their appreciation for valuable
contributions made by the outgoing Directors.

Dr. Tsutomu Une and Mr. Atul Sobti who were appointed as Directors of the
Company in the casual vacancies caused by resignations of Mr. V.K. Kaul and
Mr. Vivek Mehra respectively, hold office upto the date of this Annual
General Meeting. The Company has received Notice(s) along with requisite
deposit from member(s) under Section 257 of the Companies Act, 1956,
proposing the candidature of Dr. Tsutomu Une and Mr. Atul Sobti as
Directors of the Company. Mr. Atul Sobti being the Managing Director will
not be liable to retire by rotation in terms of the Articles of Association
of the Company.

Mr. Percy Shroff was appointed as a Director of the Company on March 27,
2009 against the casual vacancy caused by resignation of Mr. Harpal Singh.

CORPORATE GOVERNANCE:

Report on Corporate Governance along with the Certificate of the Auditors,
M/s. BSR & Co. Chartered Accountants, confirming compliance of conditions
of Corporate Governance as stipulated under Clause 49 of the Listing
Agreements with the stock exchanges forms part of the Annual Report.

COST AUDIT:

The reports of M/s. R.J. Goel & Co., Cost Accountants, in respect of audit
of the cost accounts relating to formulations and bulk drugs for the year
ended December 31, 2009, will be submitted to the Central Government in due
course.

AUDITORS:

M/s. BSR & Co., Chartered Accountants, retire as Auditors of the Company at
the conclusion of ensuing Annual General Meeting and have confirmed their
eligibility and willingness to accept the office of the Auditors, if re-
appointed.

STATEMENT OF EMPLOYEES:

Statement of particulars of employees as required under Section 217(2A) of
the Companies Act, 1956 ('Act') and Rules framed thereunder forms part of
this Report. However, in terms of the provisions of Section 219(1)(b)(iv)
of the Act, this Report and Accounts are being sent to all the shareholders
excluding the statement of particulars of employees under Section 217(2A)
of the Act. Any shareholder interested in obtaining a copy of the statement
may write to the Company Secretary at the Corporate Office of the Company.

ACKNOWLEDGEMENTS:

The Directors wish to place on record their appreciation of the significant
contribution made by each and every employee of the Company. The Directors
also thank all other stakeholders for their support and encouragement. Your
Directors look forward to your continued support in the years to come.

On behalf of the Board of Directors

Place: Gurgaon Dr. Tsutomu Une
Date : March 25, 2010 Chairman

ANNEXURE A

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE & DEVELOPMENTS:

The global pharmaceuticals market sales grew by approximately 5.7% (at
constant exchange rate), to reach US$ 727 Bn in 2009. North America, Europe
and Japan remained the key markets accounting for about 86% of the
worldwide pharmaceutical sales in 2009.

Developed Markets (US, Japan, UK, Spain, Germany, France, Italy and Canada)
grew by 4% during the year. The 'Pharmerging' markets (Brazil, Russia,
India, China, Turkey, Mexico and South Korea) continued to strengthen their
position in the global landscape and grew by 17% in 2009. Global
pharmaceutical market is projected to grow at a cumulative average growth
rate (CAGR) of 4-7% for the 2008-2013 period. Forecasted CAGR for the
Developed Market ranges between 2-5%, while the Pharmerging markets are
expected to have a CAGR between 13-16%, for the same period1.

Significant factors that have resulted in a slowdown in the pharmaceutical
market are (a) lower consumer spend due to the economic downturn, (b)
increased volume for generic drugs leading to a decrease in the total value
for the industry, and (c) lesser number of new patent protected products in
the market.

Pharmaceutical sales in North America, the world's largest market, were US$
316 Bn, a growth of 4.0%, constituting 43% of the global sales in 2009; of
these sales in the United States accounted for US$ 298 Bn and grew by 3.9%.
Europe clocked sales of US$ 226 Bn, a growth of 4.7%, and contributed 31%
to the global pharmaceutical industry. Sales in Latin America, led by key
markets of Brazil and Mexico, grew by 11.9%, to reach US$ 33 Bn. Asia,
Africa and Australia combined, grew by 9.6%, to US$ 152 Bn; Japan, the
world's second largest market, recorded sales of US$ 80 Bn, and grew by
6.1%.

The industry, especially in the generics market, has become highly
competitive. This, coupled with the drying up of pipelines of innovator
companies is leading to consolidation in the generics and innovator
industry, as a consequence, new hybrid models between innovator and generic
companies are evolving. Thus, the pharmaceutical industry is witnessing
adoption of new business models, where innovator and generic companies work
together to leverage each other's strengths. The new business model will
help innovator companies get access to emerging markets, lower
manufacturing and R&D cost base; while generics companies will gain from
higher R&D capabilities of innovators and access to innovator drugs.

Generics2:

The global generics market grew by 7.7% in 2009 to US$ 83 Bn, with the top
eight markets (US, Germany, UK, Canada, France, Spain, Italy and Japan)
contributing 76%. Growth in the generics segment in top eight markets was
8%, surpassing the 3% growth witnessed in the branded segment in the same
countries. In Japan, while generics accounted for only 14% of the market by
volume, growth during the year was a promising 12%.

Ranbaxy's collaboration with Daiichi Sankyo Co. Ltd. (DS) gives the Company
opportunity to tap the large genericizing Japanese market.

Growth in emerging markets is driven by increasing domestic consumption due
to strengthening of healthcare infrastructure, greater awareness and
improving economic conditions. Generics segment in emerging markets is
predominantly branded, which further improves attractiveness.

With over US$ 80 Bn of drugs going off patent in the next two years, and a
higher generic penetration across developed and emerging markets, the
generics market will continue to provide attractive growth opportunities.
Ranbaxy, with its diversified geographic reach across developed and
emerging markets, is well positioned to capitalise on opportunities in both
segments of the market.

1Source: IMS 31st Edition, January 2010
2Based on IMS MAT Nov 2009

The collaborative business model, as mentioned earlier, will also leverage
lower R&D cost and reach of the generics companies, especially in emerging
markets, for the innovator companies. With competitive advantages in R&D,
manufacturing and marketing, Indian companies today stand at the forefront
to partner with innovator pharmaceutical organizations.

The prevailing market environment in these geographies is discussed below:
USA: Generics market grew by 7% to US$ 34 Bn in 2009. Generics continued to
play an increasingly prominent role in the US healthcare market and
accounted for 72% of total US pharmaceutical market volume, reaching an all
time high in 2009. A major growth driver for generics is the upcoming
patent expiries for many blockbuster pharmaceutical products, which will
become open to generic competition.

According to the baseline forecast by IMS Health, the US generics market is
expected to deliver a CAGR in excess of 14% in value terms, over the period
2005 to 2010.

Europe: Generics market in Europe grew by 6.2% in value terms, up from 4.7%
growth reported in the last year, and accounted for 37.4% of the market in
volume terms, up from 36.4% in previous year.

The key markets in Western Europe were under pressure from price erosion.
While the volumes remained at a peak during the year, lower prices affected
growth. Generics market in Germany grew by 8%, in France and Spain by 7%,
while in the UK, growth was 5% during 2009. Romania, a key market in
Central Europe, was impacted due to healthcare reforms, and the market was
also under pressure from unprecedented currency fluctuation. Central,
Eastern & Southern Europe, continued to experience buoyant growth, led by a
higher per capita pharmaceutical expenditure, and an increasing utilization
of generic drugs, driven by the government's efforts to reduce healthcare
spend.

India: The Indian pharmaceutical market grew at a robust 16.9% in 2009 to
Rs. 401 Bn (ORG IMS MAT Dec 2009). Acute therapy dominated the market with
a value contribution of 71%. The acute segment grew 16.3% during the year
as against 18.7% growth witnessed in the chronic segment. Of the overall
market growth, existing products contributed 10.3%, New products (launched
in the last two years) contributed 5.7%, while price changes contributed
0.9%.

The Indian pharmaceutical sector continues to demonstrate strong growth
despite the global economic slowdown, due to inherent strength of the
Indian domestic market, economic growth, healthcare infrastructure
expansion, rising incidence of chronic diseases and increase in healthcare
access in the extra urban and rural markets. The potential of the Indian
pharmaceutical market is recognized by most of the major players, which is
manifested in diverse strategies being adopted by various organizations.
Such strategies include sales force and geographical expansion and new
products launches, etc. In order to gain market penetration, companies are
increasing their reach into the extra-urban and rural markets as well.

At present, USA, Europe and India are the three largest markets for
Ranbaxy.

OUTLOOK ON OPPORTUNITIES:

Outlook for the global generics industry continued to be positive and the
segment is expected to witness significant growth based on (a)
opportunities arising from the US$ 80 Bn drugs going off patent in the next
two years, (b) increasing healthcare burden in developed economies, leading
to higher genericization, (c) room for more genericization in some major
markets such as Japan, Australia and France, and (d) increasing healthcare
costs in developing economies, where generic pharmaceuticals generally have
an edge over the innovator companies, due to lower price structure and
better reach.

Ranbaxy, with ground operations in 46 countries, and presence in 125, is
among the top 10 generics pharmaceutical companies globally. With its
exclusive First-to-File (FTF) marketing opportunities in the United States,
including some of the world's highest selling drugs (e.g. Atorvastatin and
Esomeprazole), Ranbaxy has a balanced revenue-mix, with high growth
emerging markets contributing 56% to sales, and developed markets
contributing 44%, including revenue from the Active Pharmaceutical
Ingredients (API) business.

Collaborating with DS, our Holding Company, Ranbaxy has adopted a unique
Hybrid Business model. During the year, Ranbaxy began to leverage its
global marketing presence to market DS's innovator products. In this
context, Ranbaxy launched Olmesartan, an innovative product of DS in India.
Raloxifene, another DS innovation, was launched in Romania by Ranbaxy's
subsidiary, Terapia Ranbaxy. The Company plans to launch such products in
Africa as well as some other countries. A new business division was
established within Ranbaxy's subsidiary in Mexico, to market DS's innovator
products. Ranbaxy and DS aim to harness synergies in other diverse areas
such as R&D, manufacturing, distribution, IT, etc., as we continue to
engage together.

In order to consolidate its operations, optimize cost and improve
efficiency Ranbaxy undertook a change in the business model of its global
manufacturing operations, divesting its manufacturing facilities in China
and Vietnam. It also restructured its business operations in Europe.

USA: USA remains a key market for the Company, and will be the catalyst of
future revenue growth, on the back of a strong product pipeline. As on
December 31, 2009, the Company had 204 ANDAs filed with the USFDA, of which
138 have been approved. Market size of pipeline of the Company's pending
ANDAs, at innovator prices, is about US$ 45 Bn. Of these, the Company
believes that it has a Paragraph-IV / FTF status on 13 applications, with
sales of close to US$ 24 Bn, at current innovator prices.

The Company launched three products with exclusivity during the year, viz.,
Sumatriptan in February, Valacyclovir in November, and Oxcarbazepine
suspension in December.

Europe: Business in Europe remained under pressure during the year.
Competition among generic companies continued to increase, putting pressure
on prices. Romania, the Company's largest market in Europe, is witnessing a
liquidity crunch in the distribution channel, and also expected to undergo
multiple healthcare reforms, which is adversely affecting the market
growth. Despite the many challenges, Ranbaxy has maintained its leadership
position in generics+OTC segment in this market. The Company is
variabalizing its cost structure in Europe to counter the difficult market
conditions.

India: The Indian pharmaceutical market is expected to grow at 11-12% per
annum to reach US$ 20 Bn by 2015 and US$ 30Bn by 2020, which will place it
among the world's 10 largest pharmaceutical markets. The key catalysts for
this will be strong economic growth, increasing health awareness,
healthcare infrastructure expansion, rising incidence of chronic disease,
and increase in healthcare access in the extra urban & rural markets.

The emergence of an organized pharmaceutical retail segment and the fast
growing area of medical insurance are likely to be other important factors
that would positively impact the sector in the coming years.

OUTLOOK ON THREATS, RISKS AND CONCERNS:

The global generics business has risks associated with patent litigation,
regulatory issues and product liability, particularly in developed markets.
Innovator pharmaceutical companies also continuously develop ways to
enhance lifecycle of their patented drugs, to delay entry of alternate
generics. Further, emerging markets are becoming more competitive, with
entry of new players. Ranbaxy, as a global generic Company, faces all such
regulatory, compliance, and market risks.

Manufacturing of pharmaceutical products heavily regulated and controlled
by regulatory and government authorities across the world. Failure to fully
comply with such regulations, could lead to stringent actions from the
authorities/ government, revocation of drug approvals, failure or delay in
obtaining approvals for new products, product recalls of existing drugs
sold in the market, prohibition on the sale or import of non-complying
products, and criminal proceedings against non-complying manufacturers.

Regulators across the world, including the USFDA, have become stricter with
the pharmaceutical industry. Regulatory requirements and consequences for
non-compliance are also getting more severe.

The USFDA invoked its Application Integrity Policy (AIP) against Ranbaxy's
Poanta Sahib manufacturing facility in February 2009. Further, in December
2009, the Company received a warning letter from the USFDA for its liquid
manufacturing facility located in Gloversville, New York, USA, for certain
cGMP violations. The Company continues to co-operate fully with the
concerned authorities, towards a speedy resolution of the USFDA and
Department of Justice related issues. As regards the warning letter, the
Company has retained the services of a global consulting firm to provide
expertise and advice on issues cited by the USFDA. The above-mentioned
issues may have a negative impact on Company.

In the Indian pharmaceutical market, pricing for certain pharmaceutical
products is governed by the Drug Pricing Policy, through the Drug Price
Control Order, 1995 (DPCO). Ranbaxy has some pending legal cases, and may
face negative consequences on this account. Further, adverse changes in
DPCO / Drug Policy may affect the Company's performance.

Overseas business contributes 77% of Ranbaxy's total turnover. Sharp
movement in foreign exchange rates can, therefore, have significant impact
on the Company's financial results.

SEGMENT-WISE PERFORMANCE:

Ranbaxy recorded global consolidated sales of US$ 1,519 Mn in 2009, with
emerging and developed markets contributing 54% and 38% respectively, to
sales. Dosage form sales constituted 92% of global sales during the year,
balance being the API business. Overseas markets constituted 77% of the
total dosage form sales of the Company.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

With the objective of safeguarding the Company's assets and ensuring
financial compliance, there are documented and well established operating
procedures in the Company and its subsidiaries, in India and overseas. The
Internal Audit function at Ranbaxy reports directly to the CEO & MD and the
Audit Committee. The Internal Audit function is headed by a Vice President,
and the team comprises of well qualified, experienced professionals who
conduct regular audits across the Company's global operations. The matters
brought up by the Internal Audit team are periodically communicated to the
CEO & MD and the Audit Committee, in the form of Internal Audit reports /
comments.

On the financial operations, the Finance function of the Company is
adequately staffed with professionally qualified and experienced personnel.

FINANCIAL PERFORMANCE:

During the year, the Company recorded consolidated Global sales of
Rs.73,441 Mn (US$ 1,519 Mn). Operating margins improved significantly
primarily due to the launch of Valacyclovir (FTF) in USA, favourable forex
movement, and close management of costs during the year. Earnings before
tax were at Rs. 10,098 Mn (US$ 209 Mn), and Earnings after tax were at
Rs.3,107 Mn (US$ 64 Mn), representing 4% margin to sales.

HUMAN RESOURCES:

Human resources are the most valuable asset for the Company, and Ranbaxy
continues to seek, retain and enrich the best available talent. The Company
provides an environment which encourages initiative, innovative thinking,
and rewards performance. The Company ensures training and development of
its personnel through succession planning, job rotation, on-the-job
training, and various training programs and workshops.

The total number of employees of the Company and its subsidiaries as on
December 31, 2009 stood at 12,995.

CAUTIONARY STATEMENT:

Statements in the 'Management Discussion and Analysis' describing the
Company's objectives, estimates, expectations or projections may be
'forward looking statements' within the meaning of applicable laws and
regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Company's
operations, include Government regulations, patent laws, tax regimes,
economic developments within India and countries in which the Company
conducts business, litigation and other allied factors.

Note: Market size and growth rate for 2009 are based on IMS MAT Sep 2009
data unless otherwise indicated.

ANNEXURE B

Information regarding the Employees' Stock Option Scheme
(As on December 31, 2009)

Details Nos.

1. Total No. of Options in force at the beginning
of the year 7,272,849

2. Options granted in the year 2009 1,472,725

3. No. of Options vested during the year 1,257,680

4. No. of Options exercised during the year 36,825

5. No. of shares arising as a result of exercise
of options during the year (including additional
shares allotted on account of bonus shares as
explained in Note 2 below) 47,605

6. No. of Options lapsed and forfeited during the
year 1,295,733

7. Variance in terms of options N.A.

8. Money realized by exercise of options during
the year Rs. 11,490,128

9. Total No. of Options in force at the end of
the year 7,413,016

Notes :

1. The Grant/ Exercise and number of Stock Options outstanding as on June
30, 2005, have been proportionately adjusted in view of the sub-division of
equity shares of the Company from the face value of Rs. 10 each into 2
equity shares of Rs. 5 each.

2. Options granted upto October 3, 2002, are entitled for additional shares
on account of bonus shares in the ratio of 3 for 5.

Pricing formula: Closing price of the Equity Shares of the Company prior to
the date of meeting of the Compensation Committee (CC) in which stock
options are granted on the stock exchange on which the shares of the
Company are listed. The closing price of the shares of the Company at the
National Stock Exchange of India Limited on January 20, 2009 was Rs. 215.15
per share. Accordingly, exercise price of the options granted by the CC at
the meeting held on January 21, 2009 was fixed at Rs. 216 per share of Rs.5
each.

(i) Options granted in the year 2009 to senior managerial personnel*:

Name Designation (Present) No. of
Options
granted

Mr. Atul Sobti CEO & Managing Director 50,000

Mr. Arun Sawhney President - Global
Pharmaceuticals Business 15,000

Mr. Omesh Sethi President & Chief
Financial Officer 10,000

Dr. Sudershan K. Arora President - Research &
Development 17,500

Mr. Dipak Chattraj President - Corporate
Development 10,000

Mr. Ramesh L. Adige President - Corporate
Affairs & Global Corporate
Communications 15,000

Dr. Pradip Kumar Bhatnagar Senior Vice President -
New Drug Discovery Research 12,500

Mr. Sanjeev I. Dani Senior Vice President &
Regional Director - Asia,
CIS & Africa 12,500

Mr. Satish Kumar Chawla Vice President - Global
Internal Audit 10,000

Mr. Ranjan Chakravarti Vice President - Global
Therapy and Alliance
Management 7,500

Dr. T.G. Chandrashekhar Vice President -Quality 10,000

Mr. K. Venkatachalam Senior Vice President &
Regional Director - North
America & LATAM 15,000

Mr. Debashish Dasgupta Vice President & Regional
Director - Europe 5,000

* Excludes the Senior Managerial personnel who ceased to be in employment
with the Company.

(ii) Employees who have
been granted 5% of more : Nil
of the options granted
during the year

(iii) Employees who have
been granted options : Nil
during any one year equal
to or exceeding 1% of the
issued capital of the
Company at the time of grant

(iv) Diluted earnings per
share (EPS) : Rs. 10.74

(v) (a) Method of calculation
of employee : The Company has calculated the
employee compensation cost
compensation cost using the
Intrinsic value of the stock options.

(b) Difference between the
employee compensation : Rs. 105.99 Mn
cost so computed at (a)
above and the employee
compensation cost that
shall have been recognized
if it had used the fair value
of the options

(c) The impact of this
employee compensation : Rs. 105.99 Mn

difference on profits and : Profit/(Loss) : Rs. 5,719.84 Mn
on EPS of the Company after tax

Less: additional
employee
compensation
cost based on
fair value : Rs. 105.99 Mn

Adjusted PAT : Rs. 5,613.85 Mn

Adjusted EPS
(diluted) : Rs. 10.51

(vi) Weighted-average exercise price and fair value of Stock Options
granted : (Post split adjusted price)

Stock Options Weighted average Weighted average Closing market price
granted on exercise price Fair value at NSE on the date of
(in Rs.) (in Rs.) grant (in Rs.)

12.01.2001 336.50 145.00 324.15
03.12.2001 297.50 188.50 369.48
01.04.2002 372.50 226.00 449.48
07.02.2003 283.50 132.50 317.45
22.01.2004 496.00 212.50 503.10
17.01.2005 538.50 215.68 534.33
17.01.2006 392.00 194.07 391.15
17.01.2007 430.00 232.57 429.65
16.01.2008 391.00 107.06 390.75
11.06.2008 561.00 172.89 560.75
19.12.2008 219.00 63.31 218.60
21.01.2009 216.00 92.97 215.15

(vii) Description of the : The Black Scholes option pricing model was
method and significant developed for estimating fair value of
assumptions used during traded options that have no vesting
the year to estimate the restrictions and are fully transferable.
fair value of the options, Since Option pricing models require use of
including the following substantive assumptions, changes therein
weighted average information can materially affect fair value of
Options. The option pricing models do not
necessarily provide a reliable measure of
fair value of options.

The main assumptions used in the Black-Scholes option pricing model during
the year were as follows :

Particulars Options
granted on
21.01.2009

Dividend yield 1.49%
Expected life of options from the date(s) of grant 6.5 years
Risk free interest rate 6.22%
Expected volatility 38.60%

ANNEXURE C

Information pursuant to Companies (Disclosure of Particulars in Report of
Board of Directors) Rules, 1988 forming part of the Report of the Directors

1. CONSERVATION OF ENERGY AND ITS IMPACT:

Measures for Conservation of Energy Impact resulting
into saving
(in Rs. Million)
Power Factor maintained UNITY & Load Factor maintained
above 50% concession for Load Factor received 19.80

Reduction of steam high pressure header from 8.2 to
7.4 Kg / CM2 0.02

KGK chiller's replaced by trane chiller and Brine
facility modified from central generation to user areas 7.70

Combining the Cooling tower Pump Discharge lines for
Utilities & 3X60KL Fermentation Plant thereby Running
only one 110 KW pump instead of 2 Nos. being run
separately for 2 different streams 6.60

55KW Nitrogen Plant Air compressor is stopped by
looping the Instrument Air compressor supply to inlet
of Nitrogen plant resulting in substantial saving as
well as optimum utilization of Instrument Air Compressor 4.84

Re-engineering of Brine system in old utility.
Re-engineering has improved flow rate resulting in
efficiency improvement. This has resulted in stoppage of
one compressor 3.62

Rebate in power tariff by maintaining unity power factor
through automatic and manual controls. 3.60

Air flow optimization in Air Washers and VAHUs. Two nos.
inefficient AHUs and Air Washer replaced in MP-01 2.91

500 KVA Diesel Generation installed and running during
weekly off days and Peak load restriction hours instead
of running of 1500KVA Generator earlier 2.50

Chilled Water facility modifications from central
generation to users areas, energy saving of 90KW 2.10

5 KW (35CFM) Air compressor is installed and running
for purified water plant during 2nd and 3rd shifts
instead of 97 KW Air compressors 2.00

Integration of two cooling water & Chilled water
headers of Mohali-3 & Mohali-2 1.26

Power saving by auto switching (Motion Sensor). Running
time of light fixtures reduced from 24 hours to 10 hours. 1.11

Replacement of steam traps and recovery of Hot condensate
back to boiler house 1.0

Looped the raw water header with the process water line
thereby using Bore well pressure for Process water
circulation , this stopped 7.5 KW pump operation for
process water, this also has led to substantial energy
saving 0.66

Optimization of pump head in New Utility Cooling tower. 0.64

Replacement of Fan Type cooling towers with Jet type
cooling towers 0.41

Increase in condensate recovery from 20% to 40% from 7011
Tons of steam production. The additional automatic
condensate recovery systems installed in two plants 0.30

Replacement of old lamp type indicators (Each 5 watt)
with LED type indicators(0.8 watt) total number 550 0.10

2. RESEARCH & DEVELOPMENT:

a) Specific areas in which R&D is carried out:

- Develop technology for Active Pharmaceutical Ingredients (APIs),
conventional & value added innovative dosage forms - complying with
international quality & regulatory norms

- Develop 'Platform Technologies' and 'Products' in the area of Novel Drug
Delivery Systems

- Discovery and Development of new drug molecules in select areas:
Infectious Diseases, Metabolic Diseases, Inflammatory/Respiratory Diseases
and Oncology

- GLP/cGCP complying Bioavailability/Bioequivalence, Toxicology and
Clinical Studies (Phase - I, II & III)

- Innovation in packaging for improved patient convenience & compliance

- Up-gradation of existing technologies / products on ongoing basis

b) Benefits derived as result of R&D activities

- Technology to manufacture APIs and Dosage Forms

- Oral Controlled Release Dosage Forms leading to better patient
convenience and compliance

- Improved productivity / process efficiencies

- Internationally competitive prices and product quality

- Safe and environment friendly processes

- Generation of Intellectual wealth for the Company in key potential
markets

- Grant of process patents for Active Pharmaceutical Ingredients (APIs) as
well as dosage forms (both conventional & novel drug delivery systems)

- Product patents in the areas of drug discovery research

- Self reliance and import substitution for conservation of Foreign
Exchange

- Foreign exchange earnings / savings

- Speed to marketplace

- Enhanced business through Licensing arrangements and strategic alliances

- Enhanced Global presence / visibility

c) Future plan of action

- Continue augmenting R&D capabilities & productivity through technological
innovations, use of modern scientific and technological techniques,
training and development, benchmarking and global networking

- Greater thrust in the areas of Novel Drug Delivery Systems

- Continue developing innovative, commercially viable process know-how for
both Active Pharmaceutical Ingredients (APIs) and dosage forms

- Continue strengthening the Clinical Research infrastructure and
capabilities complying international GLP/ cGCP norms

- Continue improvements in packaging for pharmaceuticals to ensure shelf-
life/stability, quality and, better patient convenience and compliance

- Enhance national and international research networking and strategic
alliances

d) Expenditure on R&D Rs. Million
Year ended Year ended
December 31, December 31,
2009 2008

- Capital 221.98 558.28
- Revenue 4,721.84 4,155.46
- Total 4,943.82 4,713.74
- % to turnover 10.90% 10.86%

3. TECHNOLOGY, ABSORPTION, ADAPTATION AND INNOVATION:

a) Efforts in brief, made towards technology absorption and innovation

- As per 2(a) above

b) Benefit derived as a result of the above efforts, e.g. product
improvement, cost reduction, product development.

- As per 2(b) above

Future course of action

a) To continue developing innovative and commercially viable process know-
how for APIs and Dosage Forms (Conventional and Noval Drug Delivery System)

b) Information in case of imported technology (imports during the last five
years)

- Not applicable

4. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Activities relating to exports, initatives taken to increase exports;
development of new export markets of products and export plans -

- Overseas sales (excluding sales to Nepal) were Rs 28,258.24 Mn for the
financial year December 31, 2009.

- Drug Master Files (DMFs) for API were filed with the regulatory
authorities in several markets.

- Continued to receive income by way of royalty, technical and management
service fee and dividend from overseas subsidiaries / affiliates.

- Initiatives were taken for development of new export markets. These
include setting up a new division to co-market Daiichi Sankyo's innovator
products.

- Also launched differentiated branded products of Originator in Romania
through Terapia Ranbaxy

- Japan export market was also tapped for API.

- In the year under review the Company launched Dosage Formulations of
Valacyclovir,Oxycodone & Sumatreptan in the International markets.

- Ranbaxy plans to further leverage its association with Daiichi Sankyo
(DS), its Holding Company, to launch DS's products in other export markets
including 6 African countries for which plans are already underway.

Rs. Million
Year ended Year ended
December 31, December 31,
2009 2008

Earnings 31,364.51 28,537.83
Outgo 13,100.41 14,403.56

FORM - A

Form for disclosure of particulars with respect to conservation of energy:

Current Year Previous Year
2009 2008
A. Electricity and Fuel Consumption
1. Electricity

(a) Purchased Units (KWH) 132,372,169 127,981,552
Total Amount (Rs. Million) 561.87 521.70
Rate/Unit (Rs.) Rs. 4.24 Rs. 4.08

(b) Own Generation

i) Through Diesel Generator Unit (KWH) 12,308,322 8,070,600
Unit per Ltr. of Diesel Oil 3.48 3.61
Cost/Unit Rs. 8.29 Rs. 8.94

ii) Through Steam Turbine/Generator Not Applicable Not Applicable

2. Coal (Specify quality and where used) Not Applicable Not Applicable

3. Furnace Oil Qty. (K. Ltrs.) 16,364 16,188

Total Amount (Rs Million) 378.90 476.62

Average Rate (Rs. per Ltr.) Rs. 23.15 Rs. 29.44

4. Others/internal generation Not Applicable Not Applicable

B. Consumption per unit of production

Units Standards Current Year Previous Year
(if any)
Electricity

Active
Pharmaceutical
Ingredients (kwh per kg) No specific 91.36 70.55

Dosage Forms (kwh per standards - 105.78 91.73
1000 packs) consumption
per unit
depends on
product mix
Furnace Oil

Active
Pharmaceutical
Ingredients (Ltrs per Kg) 11.05 8.95

Dosage Forms K.Ltrs per 0.01 0.01
1000 packs)

Coal Not Applicable Not Applicable

Others Not Applicable Not Applicable